Cashed Coal Plants

As the US struggles to agree on an energy policy, Canada is telling energy providers that they’ll have to gradually close their coal plants when they reach the end of their commercial life, which in most cases is 5 to 15 years from now. As a weekend story in The Globe and Mail explains, the companies would not be allowed to replace or extend the life of those coal plants without adding technology to capture and sequester carbon dioxide.

Meanwhile, Washington state has taken a more collaborative approach with the owner of the state’s only coal-fired power plant in Centralia, which happens to be the Canadian company TransAlta. State officials aim to convince the company to voluntarily phase out its coal power over the next 15 years by helping it find markets and financing to develop cleaner energy sources. (Updated details are at the end of this post.)

So how did energy companies react to Canada’s tough love? They expressed the usual concerns about where new power would come from, the impacts on shareholders and whether consumers would pay more for energy. But the article goes on to mention that these companies are, in fact, already phasing out coal. TransAlta had already decided to close a 54-year-old coal plant in Alberta, presumably because it was old and not very efficient or economical. Ontario Power Generation is planning to close another 4 coal plants in the next 4 years.

As the state of Washington tries to figure out what to do with the Centralia coal plant, it’s worth remembering that market forces could force the plant to close on its own. It might even happen years before the 2025 deadline that the state has set to cut the plant’s greenhouse gas emissions in half. Coal is such a dirty form of energy that simply putting a price on climate-warming pollution would radically change the economics of burning it.

In fact, modeling by the Northwest Power and Conservation Council shows that if certain carbon pricing policies are adopted, the Northwest’s big coal plants – Centralia in Washington, Boardman in Oregon and Colstrip in Montana – would shut down between 2018 and 2022 based on economics alone. Of course, that model is based on assumptions that may or may not come to pass. (In the model, coal plants become uneconomical around the time that carbon pricing reaches $25/ton.) But it represents regional power planners’ best estimate of what the future may hold.

Clearly, based on the political wrangling over a climate bill this weekend, it would be unwise for anyone in Washington state to assume that some future federal policy will just take care of things. State officials want guarantees that the Centralia plant will cut its greenhouse gas emissions, and sometimes a voluntary approach saves time and argument. But if it doesn’t, Canada’s example shows that strong policies – whether they employ economic or regulatory levers – can get the job done too.

P.S. Not to give Canada too much credit. The country only has 21 coal plants (compared to 650 in the US) so it’s much easier for policymakers to decide the country can live without them. The country already releases a lot of greenhouse gas emissions for its population, and as The Globe and Mail article mentions, an expanding oil sands industry that will just add to that pollution. And Canada is a huge producer of natural gas that will replace much of the coal power, which isn’t the cleanest energy source either.

Update: The state of Washington and TransAlta signed a memorandum of understanding this week outlining the broad parameters and process for their negotiations. The goals are: permanently limiting greenhouse gas emissions, ending the use of coal at the plant, assuring reliable power and retaining a significant number of jobs at Centralia.They expect to publicly release a draft proposal in July.